A federal judge in Portland sentenced a brother and sister to two years in prison for their roles in long-running schemes to promote prostitution at 10 Portland-area strip clubs and adult video stores and for conspiring to evade more than $728,000 in federal income taxes by concealing from the IRS $2.6 million in income from strip shows and prostitution.
U.S. District Judge Michael Simon handed down the sentences Wednesday to Kandace Desmarais, 65, and her brother, Gilbert “Mace” Desmarais, 52, just over two months after he sentenced Lawrence G. Owen – the defendants’ stepfather and the ringleader of the conspiracies – to 30 months in prison on the same charges. Gary Bryant, a manager of several of the strip clubs in question, pleaded guilty to the same charges in March 2016 and will be sentenced on August 28, federal prosecutors said.
In imposing the sentences on Kandace and Gilbert Desmarais at the end of a 2.5-hour joint-sentencing hearing, Simon rejected the defendant’s pleas for probation. The court emphasized the scope of the family’s tax frauds and illegal prostitution activities, noting that they constituted the largest such schemes in the district in recent years.
Federal prosecutors said the defendants, together with Larry Owen, Gary Bryant, and several other members of the Desmarais family, owned and operated strip clubs called The Landing Strip, Oh! Zone, Sugar Shack, Sugar Shack Too, Peek-A-Boos, Dillingers Pub, Tommy’s, and Tommy’s Too, and adult video stores called Video Visions and Video Visions Plus.
Collectively, these businesses had 19 private show rooms on their premises, each furnished with a small couch, a chair, a table, and a stereo. Gilbert Desmarais was personally responsible for overseeing the Landing Strip and the Oh! Zone, which was the site of several such show rooms.
Customers paid at least $160 for half-hour private shows with dancers in the show rooms, and the defendants’ businesses took $60 from each transaction. During many of these private shows, with the defendants’ knowledge and encouragement, the dancers performed acts of prostitution with the customers. From January 2006 through June 2010, strippers (and, on occasion, visiting prostitutes) engaged in tens of thousands of acts of prostitution at these businesses.
Prosecutors said the defendants and their coconspirators cheated the IRS out of $728,000 in income taxes by engaging in a complicated scheme to conceal club revenue and their personal income.
They established a “cash only” policy at the strip clubs, destroyed daily records of cash receipts, transported the weekly cash receipts to the home of one of the family members, gave their tax return preparer false income numbers, and filed false income tax returns. In these ways, they concealed $2.6 million in revenues from the IRS between 2006 and mid-2010.
Kandace Desmarais served as the principal bookkeeper for these clandestine and illicit profits, carefully recording weekly revenues and, when necessary, rebuking store-level managers for failing to adequately record how often the strippers performed shows in the private rooms.
In June 2010, IRS agents and law enforcement personnel from the Portland Police Bureau and the Clackamas County Sheriff’s Office executed federal search warrants at the conspirators’ 10 strip clubs and video stores and at their homes.
Officials seized 85 boxes of records and $843,000 in cash. $557,000 of the cash was taken from the residence of Kandace Desmarais and $180,000 from the home of another family member. All funds have been forfeited to the United States pursuant to plea agreements with the U.S. Attorney’s Office.
The conspirators operated two strip clubs and a video store on the Town Plaza property they owned in the Cully neighborhood in northeast Portland. In July 2015, they sold the Town Plaza property to a coalition of nonprofits and neighborhood groups for $2.3 million. Pursuant to plea agreements, the net proceeds of the sale have been placed in escrow to pay the federal income taxes—including penalties and interest—the conspirators still owe to the IRS.
“The two-year sentences for Kandace and Gilbert Desmarais reflect the seriousness of these tax- and prostitution-related crimes,” said Billy J. Williams, U.S. Attorney for Oregon.
“The fact that these defendants and their coconspirators were forced to forfeit more than $800,000 in cash and the proceeds of the sale of the Town Plaza to the IRS underscores our ongoing commitment to force criminals to disgorge their illegal profits and to compel tax cheats to pay their fair share,” Williams continued. “As always, this office and the IRS will continue to work together to identify and prosecute those who do not.”
The case was investigated by special agents of the IRS Criminal Investigations with assistance from the Portland Police Bureau and the Clackamas County Sheriff’s Office, and was prosecuted by Seth D. Uram and Ryan W. Bounds, Assistant U.S. Attorneys for the District of Oregon.